Vietnam since c. 1990

These measures stabilized the economy, but the sudden collapse of communist rule in eastern Europe and disintegration of the Soviet Union left Vietnam completely isolated. Having begun removing its armed forces from Cambodia in 1985, Vietnam completed withdrawal in September 1989 and intensified efforts to improve relations with its neighbours. A peace conference in Paris formally ended the Cambodian conflict in 1991 and provided United Nations supervision until elections could be held in 1993. The Cambodian settlement removed a key obstacle to normalizing relations with China, Japan, and Europe. The Vietnamese agreement to help the United States determine the fate of Americans missing in action encouraged the United States to lift the embargo in 1994 and establish diplomatic relations with Hanoi in 1995. Admission to membership in ASEAN in July 1995 symbolized Vietnam’s full acceptance into the family of nations.

The return of peace and stability to the region allowed Vietnam to concentrate on the economic reforms begun in the late 1980s. The government took a pragmatic approach, responding flexibly to domestic realities while seeking ideas from diverse international sources. Major components of reform included instituting a relatively liberal foreign investment law, decollectivizing agriculture, ending fixed prices and subsidies, and significantly reducing the number of state-owned enterprises. Results were on the whole favourable. The output of food staples per capita, after a half century of decline, increased sufficiently for Vietnam to become a sizeable exporter of rice in 1989. Job creation in the private sector made up for job losses in the public sector. Foreign investment spurred growth in crude oil production, light manufacturing, and tourism. Vietnam also redirected its trade in a remarkably short period of time from ex-communist countries to such new partners as Hong Kong, Singapore, South Korea, Taiwan, and Japan. Growth in the gross domestic product (GDP) averaged nearly 8 percent annually through the 1990s.

With success, however, came a weakening of commitment to further change and renewed concern about preserving Vietnam’s "socialist orientation." One consequence was the continued prominence in the economy of state-owned enterprises, fewer than half of which were profitable but which accounted for nearly one-third of GDP. Leaders also worried that the corruption, inequality, and materialism associated with the new market economy could undermine support for the party. In 1991, Nguyen Van Linh yielded the party’s chairmanship to Do Muoi, a cautious, consensus-seeking politician. Although a new constitution enacted in 1992 was seen as a step toward loosening party control of the government, the party remained unwilling to share power with noncommunist elements. Muoi’s replacement, Le Kha Phieu, chosen in 1997 after months of bitter factional infighting, lacked both the power and the determination to accelerate the pace of reform. Internal opposition to further liberalization caused Vietnam in 1999 to decide, after years of negotiation, not to sign a trade agreement with the United States that would have also secured membership in the World Trade Organization (WTO). In the face of relentless globalization, Vietnam was threatened by paralysis on account of its reluctance to reform its political institutions.

Impatience with government corruption and slowing economic growth (exacerbated by the Asian economic crisis of the late 1990s) catalyzed large-scale demonstrations early in the 21st century. The demonstrations, in turn, ultimately contributed to the senior party leaders’ decision to replace Le Kha Phieu with Nong Duc Manh in April 2001. The new party leader immediately took steps to curb corruption, and to integrate Vietnam more fully into the global economy. Once again the country’s GDP experienced a surge of growth. Trade negotiations with the United States were rekindled, and an accord was signed later that year. At the end of 2006, Vietnam ratified the accession agreement to become the WTO’s 150th member in January 2007. Nguyen Phu Trong was chosen as the party’s new leader in January 2011, replacing a retiring Nong Duc Manh.

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